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INTERNATIONAL TRUSTS
Why set up an international trust?
There are many reasons why you may want to set up
a trust in an offshore jurisdiction. These include personal
tax, asset protection and confidentiality.
What is a trust?
See Trusts.
What are the benefits?
See the sections on personal
tax and asset protection and confidentiality.
You do not need to register trusts so they can be more confidential
then companies. Probate will not be needed for trust assets
when you die. You will also have all assets in the trust managed
from one central point, which should simplify paperwork.
What are the downsides?
Loss of control - you can no longer decide by yourself
how to invest funds or when they should be given to particular
people. The trustees will take account of your wishes (their
reputation depends on this) but must always look at what is
best for the beneficiaries.
Are there any ways around this?
Not completely, but for many people the advantages
of tax efficiency and confidentiality outweigh the fact that
the trustees have to act for the good of all beneficiaries.
You may wish to keep some indirect control by appointing a
trusted family friend or a professional adviser as Protector.
You can also use other devices to ensure your wishes are carried
out, for example; a special purpose trustee company or particular
wording in the trust document.
What is a Protector?
Although it is not essential to appoint a Protector,
in many international trusts a trusted friend or adviser of
the settlor (who is the person funding the trust) will be
appointed as Protector. His powers are as wide or narrow as
the trust document specifies. At one extreme, he will consent
to distributions of funds; payment, appointment and removal
of trustees; and the appointment of investment advisers/development
of investment policy. At a lesser level he may have a few
only of these powers. He has responsibilities to the beneficiaries
in the way he exercises his powers.
Trustees
You choose whether the trustees are professionals
(eg a bank, firm of accountants or lawyers) or other people.
The advantage of professionals is the security they offer.
Most will carry high liability insurance, which is your ultimate
safeguard. The trustees will be holding your property so you
must be able to trust them to carry out your wishes and do
the best for the beneficiaries. Any reputable trustees will
do this and we can make recommendations and help you chose
appropriately. The advantage of private individuals as trustees
is that they may have low charges and will probably understand
your wishes clearly. The risks are that the paperwork may
not be kept in order, or that the trustees have insufficient
funds to make up any loss to the trust and do not have liability
insurance.
Beneficiaries
These are the people who can take income or capital
or use trust assets. You can be one of them. Often people
will set up trusts for themselves and their children and other
descendants. You can set up a trust to benefit a particular
person (eg an illegitimate child and his/her family). It is
also possible to promote purposes (eg charity or other permitted
purposes).
What will it cost?
You will need to pay the trustees an acceptance fee
plus annual charges. They may also have lawyers’ fees
for your account. You will also have to pay our fees for advising
on the structure, reviewing documentation and negotiating
with trustees. We charge on the basis of the time we spend.
It is usually not worth setting up a trust with less than
US$750,000 (or GBP500,000). You should expect set up costs,
including the first year’s fees, to be no less than US$15,000
(or GBP10,000) and running costs to be at least US$7,500 (GBP5,000)
each year. A lot depends on the value and nature of the assets
and your objectives in setting up the trust.
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